1.

Networkingcapitalisdefinedas
(a) aratiomeasureofliquiditybestusedincrosssectionalanalysis.
(b) theportionofthefirmsassetsfinancedwithshorttermfunds.
(c) currentliabilitiesminuscurrentassets.
(d) currentassetsminuscurrentliabilities.

2.

Theportionofafirmscurrentassetsfinancedwithlongtermfundsmaybecalled
(a) workingcapital.
(b) accountsreceivable.
(c) networkingcapital.
(d) inventory.

3.Inworkingcapitalmanagement,riskismeasuredbytheprobabilitythatafirmwillbecome
(a) liquid.
(b) technicallyinsolvent.
(c) unabletomeetlongtermobligations.
(d) lessprofitable.
4.
Theconversionofcurrentassetsfrominventorytoreceivablestocashprovidesthe_________of
cashusedtopaythecurrentliabilities,whichrepresentsa(n)_________ofcash.
(a) outflow;inflow
(b) use;source
(c) source;use
(d) inflow;outflow

5.

Thegoalofworkingcapitalmanagementisto
(a) balancecurrentassetsagainstcurrentliabilities.
(b) payoffshorttermdebts.
(c) achieveabalancebetweenriskandreturninordertomaximizethefirmsvalue.
(d) achieveabalancebetweenshorttermandlongtermassetssothattheyaddtotheachievement
ofthefirmsoverallgoals.

6.

Currentliabilitiescanbeviewedas
(a) debtsdueinoneyear.
(b) debtsdueinlessthanayear.
(c) sourcesofcashinflows.
(d) sourcesofcashoutflows.

7.

Themostdifficultsetofaccountstopredictare
(a) currentassets.
(b) currentliabilities.
(c) fixedassets.
(d) longtermdebt.

8.

Currentliabilitiesare
(a) easytoobtain.
(b) lowerincostthanlongtermliabilities.

(c) tiedtotheleveloffixedassets.
(d) afunctionofcollectionpolicy.
9.

Ingeneral,themoreworkingcapitalafirmhas,
(a) thegreateritsrisk.
(b) theloweritsrisk.
(c) thelesslikelyarecreditorstolendtothefirm.
(d) theloweritsleveloflongtermfunds.

10.

A(n)_________incurrentassets_________networkingcapital,thereby_________theriskof
technicalinsolvency.
(a) decrease;increases;increasing
(b) increase;decreases;increasing
(c) increase;increases;reducing
(d) decrease;decreases;reducing

11.
A(n)_________incurrentliabilities_________networkingcapital,thereby_________therisk
oftechnicalinsolvency.
(a) decrease;increases;increasing
(b) increase;decreases;increasing
(c) increase;increases;reducing
(d) decrease;decreases;reducing
12.

Whenaportionofthefirmsfixedassetsarefinancedwithcurrentliabilities,thefirm
(a) haspositivenetworkingcapital.
(b) hasnegativenetworkingcapital.
(c) hasexcessiveamountsofcurrentassets.
(d) isinalowriskposition.

13.

Thepurposeofmanagingcurrentassetsandcurrentliabilitiesisto
(a) achieveaslowalevelofcurrentassetsaspossible.
(b) achieveaslowalevelofcurrentliabilitiesaspossible.
(c) achieveabalancebetweenprofitabilityandriskthatcontributestothefirmsvalue.
(d) achieveashighalevelofcurrentliabilitiesaspossible.

14.

Relativetocashflowsaffectingnetworkingcapital,allofthefollowingaretrueEXCEPT
(a)
(b)
(c)
(d)

cashinflowsaregenerallymorepredictablethancashoutlays.
cashoutlaysforcurrentliabilitiesarerelativelypredictable.
themorepredictablethecashinflows,thelessnetworkingcapitalafirmneeds.
becausemostfirmsareunabletomatchcashinflowstooutflowswithcertainty,currentassets
thatmorethancoveroutflowsforcurrentliabilitiesarenecessary.

15.
Thefirmspermanentfinancingrequirementisfinancedwith_________intheaggressive
financingstrategy.

(a)
(b)
(c)
(d)

longtermsources
shorttermsources
retainedearnings
accountspayable

16.

Mostfirmsemploy_________financingstrategy.
(a) anaggressive
(b) aconservative
(c) atradeoff
(d) aseasonal

17.

Thefirmsfinancingrequirementscanbeseparatedinto
(a) currentliabilitiesandlongtermfunds.
(b) currentassetsandfixedassets.
(c) currentliabilitiesandlongtermdebt.
(d) seasonalandpermanent.

18.

Thebasicstrategiesfordeterminingtheappropriatefinancingmixare
(a) seasonalandpermanent.
(b) shorttermandlongterm.
(c) aggressiveandconservative.
(d) currentandfixed.
Ifafirmusesanaggressivefinancingstrategy,

19.

(a)
(b)
(c)
(d)

itincreasesreturnandincreasesrisk.
itincreasesreturnanddecreasesrisk.
itdecreasesreturnandincreasesrisk.
itdecreasesreturnanddecreasesrisk.

20.

Onemajorriskafirmassumesinanaggressivefinancingstrategyis
(a) thepossibilitythatcollectionswillbeslowerthanexpected.
(b) thepossibilitythatlongtermfundsmaynotbeavailablewhenneeded.
(c) thepossibilitythatshorttermfundsmaynotbeavailablewhenneeded.
(d) thepossibilitythatitwillrunoutofcash.

21.

The_________isthetimeperiodthatelapsesfromthepointwhenthefirmmakestheoutlayto
purchaserawmaterialsonaccounttothepointwhenpaymentismadetothesupplierofthegoods.
(a) cashconversioncycle
(b) averagepaymentperiod
(c) averageageofinventory
(d) averagecollectionperiod

22.

Whenmanaginginventories,agoodstrategyistoincreaseinventoryturnoverbydoingthe
followingEXCEPT
(a) increaserawmaterialsturnover.
(b) shortentheproductioncycle.
(c) producelowcostshortcyclegoods.
(d) increasefinishedgoodsturnover.

23.
Thebasicstrategiesthatshouldbeemployedbythebusinessfirminmanagingcashincludeallof
thefollowingEXCEPT

(a)
(b)
(c)
(d)

payingaccountspayableaslateaspossiblewithoutdamagingthefirmscreditrating.
turningoverinventoryasquicklyaspossible,avoidingstockouts.
operatinginafashionthatrequiresmaximumcash.
collectingaccountsreceivableasquicklyaspossiblewithoutdamagingcustomerrapport.

24.

The_________ofafirmistheamountoftimethatelapsesfromthepointwhenthefirmmakesan
outlaytopurchaserawmaterialstothepointwhencashiscollectedfromthesaleofthefinished
good.
(a) cashturnover
(b) cashconversioncycle
(c) averageageofinventory
(d) averagecollectionperiod

25.

The_________ofafirmistheamountoftimethatelapsesfromthepointwhenthefirminputs
materialandlaborintotheproductionprocesstothepointwhencashiscollectedfromthesaleof
thefinishedproductthatcontainstheseproductioninputs.
(a) cashconversioncycle
(b) averageageofinventory
(c) operatingcycle
(d) averagecollectionperiod

26.

Afirmhasanaverageageofinventoryof90days,anaveragecollectionperiodof40days,andan
averagepaymentperiodof30days.Thefirmsoperatingcycleis_________days.
(a) 110
(b) 130
(c) 120
(d) 70
27.
Afirmhasanoperatingcycleof120days,anaveragecollectionperiodof40days,andan
averagepaymentperiodof30days.Thefirmsaverageageofinventoryis_________days.
(a) 80

(b) 50
(c) 90
(d) 70
28.

Afirmhasacashconversioncycleof80days,anaveragecollectionperiodof25days,andan
averageageofinventoryof70days.Itsoperatingcycleis_________days.
(a)
(b)
(c)
(d)

95
105
60
130

29.

Afirmhasanaverageageofinventoryof60days,anaveragecollectionperiodof45days,andan
averagepaymentperiodof30days.Thefirmscashconversioncycleis_________days.
(a) 15
(b) 45
(c) 75
(d) 135

30.

Afirmhasacashconversioncycleof120days,anaveragecollectionperiodof25days,andan
averagepaymentperiodof50days.Thefirmsaverageageofinventoryis_________days.
(a) 45
(b) 95
(c) 125
(d) 145
Afirmpurchasedrawmaterialsonaccountandpaidforthemwithin30days.Therawmaterials
wereusedinmanufacturingafinishedgoodsoldonaccount100daysaftertherawmaterialswere
purchased.Thecustomerpaidforthefinishedgood60dayslater.Thefirmscashconversioncycle
is_________days.
(a) 10
(b) 70

31.

(c) 130
(d) 190
32.

The_________isthetimeperiodthatelapsesfromthepointwhenthefirmusestherawmaterials
inmanufacturingafinishedgoodtothepointwhenthefinishedgoodissold.
(a) cashturnover
(b) cashconversioncycle
(c) averageageofinventory
(d) averagecollectionperiod

33.

The_________isthetimeperiodthatelapsesfromthepointwhenthefirmsellsafinishedgoodon
accounttothepointwhenthereceivableiscollected.
(a) cashconversioncycle
(b) averagepaymentperiod
(c) averageageofinventory
(d) averagecollectionperiod

34.

Afirmhasanaverageageofinventoryof101days,anaveragecollectionperiodof49days,andan
averagepaymentperiodof60days.Thefirmscashconversioncycleis
(a) 150days.
(b) 90days.
(c) 112days.
(d) 8days.
Afirmcanreduceitscashconversioncycleby
(a) increasingtheaverageageofinventory.
(b) increasingtheaveragecollectionperiod.
(c) decreasingtheaveragepaymentperiod.

35.

(d) increasingtheaveragepaymentperiod.
36.

Afirmwithacashconversioncycleof175dayscanstretchitsaveragepaymentperiodfrom
30daysto45days.Thiswillresultina/an
(a)
(b)
(c)
(d)

decreaseof15daysinthecashconversioncycle.
increaseof15daysinthecashconversioncycle.
decreaseof30daysinthecashconversioncycle.
increaseof30daysinthecashconversioncycle.

37.

Afirmhasanaverageageofinventoryof20days,anaveragecollectionperiodof30days,andan
averagepaymentperiodof60days.Thefirmscashconversioncycleis_________days.
(a) 70
(b) 50
(c) 10
(d) 110

38.

Anincreaseintheaveragecollectionperiodwillresultin_________intheoperatingcycle.

39.

(a) anincrease
(b) adecrease
(c) anundeterminedchange
(d) nochange
Anincreaseintheaveragepaymentperiodwillresultin_________intheoperatingcycle.
(a) anincrease
(b) adecrease
(c) anundeterminedchange
(d) nochange

40.

Adecreaseintheaverageageofinventorywillresultin_________inthecashconversioncycle.
(a) anincrease
(b) adecrease
(c) anundeterminedchange
(d) nochange

41.

Anincreaseintheaveragepaymentperiodwillresultin_________inthecashconversioncycle.
(a) anincrease
(b) adecrease
(c) anundeterminedchange
(d) nochange

42.

Afirmhasanaverageageofinventoryof60days,anaveragecollectionperiodof45days,andan
averagepaymentperiodof30days.Thefirmsoperatingcycleis_________days.
(a) 75
(b) 105
(c) 90
(d) 135

43.

Afirmhasanoperatingcycleof170days,anaveragepaymentperiodof50days,andanaverage
ageofinventoryof145days.Thefirmsaveragecollectionperiodis_________days.
(a)
(b)
(c)
(d)

25
75
95
120

44.

Afirmhasacashconversioncycleof60daysandaveragecollectionperiodof40days.Thefirms
operatingcycleis_________days.
(a) 20
(b) 100
(c) 50
(d) Cannotbedetermined

45.

Afirmhasanaverageageofinventoryof101days,anaveragecollectionperiodof49days,andan
averagepaymentperiodof60days.Thefirmsinventoryturnoveris_________.
(a) 3.2
(b) 4.0
(c) 2.5
(d) 3.6

46.

Thegoalofafirmscashmanagementisto
(a) increasethecashconversioncycle.
(b) increasethepaymentperiod.
(c) minimizecashrequirement.
(d) maximizecashoutflows.

47.

Onewaytoimprovethecashconversioncycleisto
(a)
(b)
(c)
(d)

speedupcollections.
slowdowncreditapprovals.
reduceinventoryturnover.
borrowfunds.

48.

Ifafirmincreasesitscurrentassetsrelativetototalassets,
(a) itincreasesreturnandreducesrisk.
(b) itincreasesreturnandincreasesrisk.
(c) itreducesreturnandreducesrisk.
(d) itreducesreturnandincreasesrisk.

49.

Afirmwithhighlyunpredictablesalesrevenuewouldbestchoose_________financingstrategyto
minimizerisk.
(a) theaggressive
(b) theconservative
(c) thetradeoff
(d) aseasonal

50.

Certainfinancingplansaretermedconservativewhen
(a) shorttermfinancingisusedfrequently.
(b) workingcapitalisrelativelyhigh.
(c) workingcapitalisrelativelylow.
(d) riskisincreased.

51.

Anincreaseinthecurrentassettototalassetratiohastheeffectsof_________onprofitsand
_________onrisk.
(a) anincrease;anincrease
(b) anincrease;adecrease
(c) adecrease;adecrease

(d) adecrease;anincrease
52.

Adecreaseinthecurrentassettototalassetratiohastheeffectsof_________onprofitsand
_________onrisk.
(a)
(b)
(c)
(d)

53.

anincrease;anincrease
anincrease;adecrease
adecrease;adecrease
adecrease;anincrease

Anincreaseinthecurrentliabilitiestototalassetsratiohastheeffectsof_________onprofitsand
_________onrisk.
(a)
(b)
(c)
(d)

anincrease;anincrease
anincrease;adecrease
adecrease;adecrease
adecrease;anincrease

54.

Adecreaseinthecurrentliabilitiestototalassetsratiohastheeffectsof_________onprofitsand
_________onrisk.
(a) anincrease;anincrease
(b) anincrease;adecrease
(c) adecrease;adecrease
(d) adecrease;anincrease

55.

Theaggressivefinancingstrategyresultsinthefirmfinancingitsshorttermneedswith_________
fundsanditslongtermneedswith_________funds.
(a) longterm;shortterm
(b) shortterm;longterm
(c) permanent;seasonal
(d) seasonal;permanent

IrishAirServiceshasdeterminedseveralfactorsrelativetoitsassetandfinancingmix.
(a) Thefirmearns10percentannuallyonitscurrentassets.
(b) Thefirmearns20percentannuallyonitsfixedassets.
(c) Thefirmpays13percentannuallyoncurrentliabilities.
(d) Thefirmpays17percentannuallyonlongtermfunds.
(e) Thefirmsmonthlycurrent,fixedandtotalassetrequirementsforthepreviousyeararesummarized
inthetablebelow:
Table14.1

Month
January
February
March
April
May
June
July
August
September
October
November
December

Current
Assets
$45,000
40,000
50,000
55,000
60,000
75,000
75,000
75,000
60,000
55,000
50,000
50,000

Fixed
Assets
$100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000

Total
Assets
$145,000
140,000
150,000
155,000
160,000
175,000
175,000
175,000
160,000
155,000
150,000
150,000

56.

57.

Thefirmsmonthlyaveragepermanentfundsrequirementis(SeeTable14.1)
(a) $100,000.
(b) $57,500.
(c) $140,000.
(d) $157,500.
Thefirmsmonthlyaverageseasonalfundsrequirementis(SeeTable14.1)
(a) $17,500.
(b) $57,500.
(c) $40,000.
(d) $157,500.

58.

Thefirmsannualfinancingcostsoftheaggressivefinancingstrategyare(SeeTable14.1)
(a) $21,175.
(b) $26,075.
(c) $24,475.
(d) $22,775.

59.

Thefirmsannualfinancingcostsofconservativefinancingstrategyare(SeeTable14.1)
(a) $22,775.
(b) $26,075.
(c) $29,750.
(d) $21,175.

60.

Thefirmsannualprofitsontotalassetsforthepreviousyearwere(SeeTable14.1)
(a) $20,000.
(b) $21,500.
(c) $23,625.
(d) $25,750.

61.
IfthefirmscurrentliabilitiesinDecemberwere$40,000,thenetworkingcapitalwas(See
Table14.1)
(a) $140,000.
(b) $60,000.
(c) $10,000.
(d) $10,000.
Table14.2

Assets
Currentassets
Fixedassets
Total

FlumPackages,Inc.
Liabilities&Equity
$10,000
CurrentLiabilities
$5,000
20,000
Longtermdebt
12,000
Equity
13,000
$30,000
Total
$30,000

Thecompanyearns5percentoncurrentassetsand15percentonfixedassets.Thefirmscurrent
liabilitiescost7percenttomaintainandtheaverageannualcostoflongtermfundsis20percent.
62.

Thefirmsinitialratioofcurrenttototalassetis_________.(SeeTable14.2)
(a)
(b)
(c)
(d)

63.

1:3
3:1
2:3
3:2

Thefirmsinitialnetworkingcapitalis(SeeTable14.2)
(a) $5,000.
(b) $13,000.
(c) $5,000.
(d) $10,000.

64.

Thefirmsinitialannualprofitsontotalassetsare(SeeTable14.2)

(a)
(b)
(c)
(d)

$2,500.
$3,500.
$3,000.
$4,500.

65.

Ifthefirmwastoshift$3,000ofcurrentassetstofixedassets,thefirmsnetworkingcapitalwould
_________,theannualprofitsontotalassetswould_________,andtheriskoftechnicalinsolvency
would_________,respectively.(SeeTable14.2)
(a) increase;decrease;increase
(b) decrease;increase;decrease
(c) increase;decrease;decrease
(d) decrease;increase;increase

66.

Ifthefirmwastoshift$7,000offixedassetstocurrentassets,thefirmsnetworkingcapitalwould
_________,theannualprofitsontotalassetswould_________,andtheriskofnotbeingableto
meetcurrentobligationswould_________,respectively.(SeeTable14.2)
(a) increase;decrease;increase
(b) decrease;increase;decrease
(c) increase;decrease;decrease
(d) decrease;increase;increase

67.

Ifthefirmwastoshift$2,000ofcurrentliabilitiestolongtermfunds,thefirmsnetworking
capitalwould_________,theannualcostoffinancingwould_________,andtheriskoftechnical
insolvencywould_________,respectively.(SeeTable14.2)
(a) decrease;decrease;increase
(b) increase;increase;decrease
(c) decrease;increase;decrease
(d) increase;decrease;decrease
Thefirmwouldliketoincreaseitscurrentratio.Thisgoalwouldbeaccomplishedmostprofitably
by(SeeTable14.2)

68.

(a)
(b)
(c)
(d)

increasingcurrentliabilities.
decreasingcurrentliabilities.
increasingcurrentassets.
decreasingcurrentassets.

69.

Intheaggressivefinancingstrategy,afirmanticipatingalargeincreaseinsalesshouldfinancethe
increaseinworkingcapitalwith
(a) thesaleofcommonstock.
(b) thesaleofabondissue.
(c) alineofcredit.
(d) alongtermnotefromthebank.

70.

Theaggressivefinancingstrategyisriskyintworespects:thefirmoperateswithalowlevelof
_________,andthefirmhasonlyalimitedamountof_________capacity.
(a) currentliabilities;shorttermborrowing
(b) networkingcapital;shorttermborrowing
(c) currentassets;longtermborrowing
(d) networkingcapital;longtermborrowing

71.

Theconservativefinancingstrategyresultsinfinancingallprojectedfundsrequirementswith
_________fundsanduseof_________fundsintheeventofanunexpectedcashoutflow.
(a)
(b)
(c)
(d)

longterm;shortterm
shortterm;longterm
permanent;seasonal
seasonal;permanent

72.

Intheory,theconservativefinancingstrategyignores
(a) allcurrentliabilities.
(b) thespontaneousformsofshorttermfinancing.
(c) currentassets.
(d) thehighriskassociatedwiththisstrategy.

73.

Ineconomicconditionscharacterizedbyascarcityofshorttermfunds,afirmwouldbestchoose
the_________financingstrategy.
(a) aggressive
(b) conservative
(c) permanent
(d) seasonal

74.

Ariskofthe_________financingstrategyisunpredictableinterestexpense.
(a)
(b)
(c)
(d)

75.

aggressive
conservative
permanent
seasonal

The_________financingstrategyrequiresthefirmtopayinterestonexcessfundsborrowedbut
notneededthroughouttheentireyear.
(a) aggressive
(b) conservative
(c) permanent
(d) seasonal

76.

Theaggressivefinancingstrategyis_________methodwhiletheconservativefinancingstrategyis
_________method.
(a)
(b)
(c)
(d)

ahighprofit,highrisk;alowprofit,lowrisk
ahighprofit,lowrisk;alowprofit,highrisk
alowprofit,highrisk;ahighprofit,lowrisk
alowprofit,lowrisk;ahighprofit,highrisk

77.

Ineconomicconditionscharacterizedbyshortterminterestrateswhichexceedlongterminterest
rates,thefinancingstrategywhichwouldmaximizeprofitsis_________strategy.
(a) theaggressive
(b) theconservative
(c) thetradeoff
(d) aseasonal

78.

Anincreaseintheaveragepaymentperiodwillresultin_________intheoperatingcycleand
_________inthecashconversioncycle.
(a) anincrease;adecrease
(b) adecrease;adecrease
(c) adecrease;nochange
(d) nochange;adecrease

79.

Thedifferencebetweenthenumberofdaysresourcesaretiedupintheoperatingcycleandthe
numberofdaysthefirmcanusespontaneousfinancingbeforepaymentismadeisthe

80.

(a) cashconversioncycle.
(b) averagepaymentperiod.
(c) averagecollectionperiod.
(d) averageageofinventory.
Adecreaseintheproductiontimetomanufactureafinishedgoodwillresultin_________inthe
cashconversioncycle.

(a)
(b)
(c)
(d)

anincrease
adecrease
anundeterminedchange
nochange

81.

Afirmhasannualoperatingoutlaysof$1,800,000andacashconversioncycleof60days.Ifthe
firmcurrentlypays12percentfornegotiatedfinancingandreducesitscashconversioncycleto
50days,theannualsavingsis
(a) $50,000
(b) $200,000
(c) $6,000.
(d) $216,000.

82.

Afirmhasacashconversioncycleof60days.Annualoutlaysare$12millionandthecostof
negotiatedfinancingis12percent.Ifthefirmreducesitsaverageageofinventoryby10days,the
annualsavingsis_________.
(a) $104,000
(b) $144,000
(c) $28,800
(d) $40,000

83.

Ideallyafirmwouldliketohavea
(a) negativeoperatingcycle.
(b) positiveoperatingcycle.
(c) negativecashconversioncycle.
(d) positivecashconversioncycle.
Anegativecashconversioncycle
(a) meansthattheoperatingcycleexceedstheaveragepaymentperiod.

84.

(b) meansthattheaveragepaymentperiodexceedstheoperatingcycle.
(c) indicatesthatthefirmisshorteningitsaveragepaymentperiodandlengtheningitsaverage
collectionperiod.
(d) iseasyforamanufacturingfirmtoattain.
85.

Afirmmayhaveanegativecashconversioncycleifit
(a) carriesverylittleinventoryandsellsitsproductsoncredit.
(b) carrieshighinventoryandsellsitsproductsoncredit.
(c) carriesverylittleinventoryandsellsitsproductsforcash.
(d) carrieshighinventoryandsellsitsproductsforcash.

86.

ImprovementstocashmanagementincludeallofthefollowingEXCEPTareductionin
(a)
(b)
(c)
(d)

87.

88.

thecashturnover.
thecashconversioncycle.
theaverageageofinventory.
theaveragecollectionperiod.

Afirmwithacashconversioncycleof175dayscanstretchitsaveragepaymentperiodfrom
30daysto45days.Thiswillresultina(n)_________inthecashconversioncycleof
_________days.
(a) increase;15
(b) decrease;15
(c) increase;45
(d) decrease;45
Afirmwithaverylowcurrentratioincomparisontotheindustrystandardcouldlowertheriskof
unavailableshorttermfundsbymovingtoward_________financingstrategy.
(a) theaggressive
(b) theconservative

(c) apermanent
(d) aseasonal
89.

Afirmwhichusestheaggressivefinancingstrategyplanstopurchaseamajorfixedassetfinanced
withaloan.Themostlikelyconsequenceofthisactionis
(a) adecreaseinthecurrentratio.
(b) anincreaseinnetworkingcapital.
(c) adecreaseintheriskoftechnicalinsolvency.
(d) anincreaseinlongtermdebt.

90.

Afirmwhichusestheaggressivefinancingstrategyplanstopurchaserawmaterialsinlarge
quantitiestotakepricediscounts.Thefirmwillfinancethepurchasewithaloan.Themostlikely
consequenceofthisactionis
(a) adecreaseinthecurrentratio.
(b) anincreaseinnetworkingcapital.
(c) anundeterminedchangeinthecurrentratio.
(d) anincreaseinlongtermdebt.

91.

The_________inventorycontainsthebasiccomponentsoftheproductionprocess.

92.

(a) rawmaterials
(b) workinprocess
(c) finishedgoods
(d) capitalgoods
The_________inventoryconsistsofallitemscurrentlyintheproductionprocess.
(a) rawmaterials
(b) workinprocess
(c) finishedgoods

(d) capitalgoods
93.

The_________inventoryconsistsofitemsthathavebeenproducedbutnotyetsold.
(a) rawmaterials
(b) workinprocess
(c) finishedgoods
(d) capitalgoods

94.

ThethreebasictypesofinventoryareallofthefollowingEXCEPT
(a) rawmaterials
(b) workinprocess
(c) finishedgoods
(d) capitalgoods

95.

AllofthefollowingmanagerswouldliketohavelargeinventoriesEXCEPTthe_________
manager.
(a)
(b)
(c)
(d)

financial
marketing
manufacturing
purchasing

96.Workingcapitalmanagementinvolvesallofthefollowingexcept___.
(a) shorttermfinancingdecisions
(b) shortterminvestmentdecisions
(c) fixedassets

(d) interestrates
(e) selectionofloancurrencies
97.Leadsandlagsareaformofworkingcapitalmanagementby.
(a)acceleratinghardcurrencypayablespaymentsanddelayingsoftcurrencypayables
payments
(b)delayingaccountsreceivablepaymentsandspeedingupaccountspayablepayments
(c)acceleratingbothreceivablesandpayablespayments
(d)acceleratingsoftcurrencypayablespaymentsandacceleratinghardcurrencypayables
payments
(e)alloftheabove
98.Thedaytodayfinancialaffairsofthefirmareusuallyreferredtoas________.
(a)
(b)
(c)
(d)

workingcapitalmanagement
capitalstructure
capitalbudgeting
strategicplanning

99.Foratypicalfirm,whichofthefollowingstatementsismostcorrect?
(a) TheCFOhasthreedepartmentsreportingtohim:financialplanning,treasuryand
control.
(b) Thetreasureroverseestheaccountingandauditingactivitiesofthefirm.
(c) Thecontrollerhasresponsibilityformanagingthefinancingactivitiesofthefirmandfor
workingcapitalmanagement.
(d) TheCEOisaseniorvicepresidentwithresponsibilityforallthefinancialfunctionsinthe
firm
100. Whichofthefollowingarefinancialdecisionsafirmhastomake?
(a)
(b)
(c)
(d)

financingdecisions
capitalbudgetingdecisions
workingcapitaldecisions
alloftheabove

101. Net working capital includes ___.

A.
accounts receivable
B.
accounts payable
C.
inventory
D.
A and B
E.
all of the above